FRANKFURT (Reuters) – Euro zone companies expect their turnover to continue to rise this quarter but their margins remain under pressure as wage growth outpaced increases in selling prices, the European Central Bank said in its quarterly survey on Thursday.
Eurozone economic growth has been above zero for more than a year and companies, which have enjoyed very high margins in recent years, are now seeing their margins fall significantly, fueling fears that they will start reducing headcount.
“This survey shows that cost pressures remain widespread across all sizes of business,” the ECB said in its Access to Corporate Financing Survey. “Companies… continue to report declines in their profits compared to the previous survey round.”
Businesses expect selling prices to rise by 3% over the next 12 months while wages are expected to rise by 3.5%, the ECB said based on a survey of nearly 13,000 companies, most of which employ fewer than 250 employees.
The 3% increase in selling prices is still far above the ECB's inflation target of 2% and the business world estimates inflation of 2.9% in one, three and five years.
Businesses reported a decline in the need for bank loans in the third quarter but they also said loans were more easily available than in the previous three months.
However, they also became less optimistic about the availability of bank loans over the next three months, the ECB added.